Rais­ing Keynes

Of aus­ter­ity, debt re­lief and pé­tanque: Olivier Blan­chard, an ‘economist’s economist,’ ar­rived in Washington just in time for the bat­tle against the Great Re­ces­sion and re­turned the In­ter­na­tional Mon­e­tary Fund to its in­tel­lec­tual roots.

The Washington Post Sunday - - BUSINESS - BY STEVEN PEARL­STEIN IN ILE DE RE, FRANCE

When David Lip­ton, a promis­ing economist, was fin­ish­ing his grad­u­ate work at Har­vard Univer­sity in the early 1980s, he faced one of those po­ten­tially life-chang­ing choices. He had one job of­fer from the In­ter­na­tional Mon­e­tary Fund in Washington, the multi­na­tional in­sti­tu­tion that for 70 years has served as len­der of last re­sort and dis­penser of ortho­dox eco­nomic ad­vice to coun­tries that get into fi­nan­cial trou­ble. There was also an of­fer of a teach­ing job from the Univer­sity of Vir­ginia. Un­sure of which path to take, he turned for ad­vice to an in­tel­lec­tu­ally rest­less and charis­matic as­sis­tant pro­fes­sor, a French­man named Olivier Blan­chard. Blan­chard’s terse ad­vice: “David, if you go to the IMF, you’ll be throw­ing your ca­reer away.”

Life, how­ever, takes un­ex­pected turns. Last week, the same in­tel­lec­tu­ally rest­less and charis­matic Blan­chard stepped down as the IMF’s top economist af­ter seven tu­mul­tuous years that in­cluded the worst fi­nan­cial cri­sis in a gen­er­a­tion, a global re­ces­sion, a three-act Greek tragedy and the near-col­lapse of the euro. Over his two terms, Blan­chard helped wean the IMF off its ob­ses­sions with low in­fla­tion, fis­cal aus­ter­ity and un­reg­u­lated flows of cap­i­tal, res­ur­rect­ing the eco­nom­ics of John May­nard Keynes at an in­sti­tu­tion that the Bri­tish economist had helped to cre­ate but where, more re­cently, he had fallen out of fa­vor.

As one col­league put it, Blan­chard “changed the­way the Fund looked at the world and the way the world looked at the Fund.” Inthe process, he helped the IMF pull the global econ­omy back from the brink of another Great De­pres­sion.

“He was ex­actly what the world needed at a cru­cial mo­ment,” Ge­orge Ak­erlof, a No­bel lau­re­ate, said of Blan­chard’s ten­ure at the IMF.

Blan­chard’s story, how­ever, is not just one about an im­por­tant but ob­scure Washington-based in­sti­tu­tion. It is also a per­sonal tale of a once rad­i­cal French youth who be­came one of the most in­flu­en­tial econ­o­mists whom most peo­ple have never heard of. Blan­chard’s ten­ure at the IMF capped a life­long ef­fort to re­store eco­nom­ics as a dis­ci­plined way of think­ing about the world that is truth­ful, in­tu­itive and use­ful.

“Olivier is one of those rare aca­demics who de­serve to have a li­cense to prac­tice,” said the IMF’s first deputy man­ag­ing di­rec­tor, the sec­ond in com­mand, sit­ting in the Fund’s head­quar­ters on Penn­syl­va­nia Av­enue. “The world is full of econ­o­mists who are will­ing to be­lieve only what they can prove. We don’t have that lux­ury here. What we do has to be based not just on what we know but on our judg­ment about what we don’t know. Let’s just say we came to trust Olivier’s judg­ment.”

That deputy di­rec­tor? David Lip­ton.

As one of the world’s lead­ing macroe­conomists, and for 25 years a main­stay at the star-stud­ded eco­nom­ics depart­ment at the Mas­sachusetts In­sti­tute of Tech­nol­ogy, Blan­chard was an ob­vi­ous choice for the job of re­search di­rec­tor and eco­nomic coun­selor. Twice he’d been of­fered the job. Twice he had turned it down.

But when Do­minique Strauss-Kahn, the IMF’s new man­ag­ing di­rec­tor, called in spring 2008, Blan­chard was more than a lit­tle in­trigued. Strauss-Kahn was a fel­low French­man and a grad­u­ate of the same French univer­sity. As the lead­ing So­cial­ist can­di­date to be the next pres­i­dent of France, he had the stature and po­lit­i­cal skills to deal with the pres­i­dents, prime min­is­ters and trea­sury sec­re­taries who ul­ti­mately call the shots at the IMF, which was cre­ated in 1946 at an in­ter­na­tional con­fer­ence at which Keynes was a cen­tral fig­ure. Strauss-Kahn promised Blan­chard an ac­tivist agenda along with a more vis­i­ble role for the re­search team.

“He’s a politi­cian, so within two min­utes he’s your best friend,” Blan­chard said.

Blan­chard re­mem­bers his first months in Washington as “con­fus­ing, ex­cit­ing, frus­trat­ing,” as in­creas­ingly des­per­ate world lead­ers searched for away to con­tain the fi­nan­cial con­ta­gion that had spread quickly from the United States to Europe and the rest of the world. With the IMF pro­vid­ing much of the eco­nomic anal­y­sis, Euro­pean lead­ers set aside their fix­a­tion with bud­get deficits and com­mit­ted to join the United States and Bri­tain in in­creas­ing gov­ern­ment bor­row­ing and spend­ing to pre­vent a global de­pres­sion. It was ex­actly the ad­vice Keynes had given to skep­ti­cal world lead­ers in the 1930s.

“We knew that 1 per­cent stim­u­lus was not enough, but 3 per­cent we prob­a­bly couldn’t sell,” Blan­chard said, “so we went with a rec­om­men­da­tion of 2 per­cent.”

Un­der Blan­chard, the re­searchers gained a seat at the ta­ble where IMF de­ci­sions were made. Strauss-Kahn said that at his meet­ings with top lieu­tenants, Blan­chard “quickly took the lead, and his opin­ion pre­vailed eight out of 10 times.”

Blan­chard ex­horted his staff of 100 econ­o­mists to be less aca­demic and fo­cus their re­search on ques­tions of im­me­di­ate con­cern. By all ac­counts, he raised the bar on the qual­ity of re­search, de­mand­ing more rigor in the anal­y­sis and greater clar­ity. When a col­league hit a dead end, Blan­chard was not above tak­ing out pen­cil and pa­per and spend­ing an evening writ­ing out am­ath­e­mat­i­cal model.

Strauss-Kahn, al­ways on the look­out to raise the Fund’s vis­i­bil­ity, had charged the re­search depart­ment with join­ing the global de­bate over in­come in­equal­ity. Blan­chard was skep­ti­cal of the early anal­y­sis — it wasn’t ob­vi­ous to him whether in­equal­ity caused slow growth or the other way around — but af­ter rounds of backand-forth he fi­nally signed off on a pa­per con­clud­ing that high lev­els of in­equal­ity were likely to re­sult in growth rates that were “low and un­sus­tain­able.” The team also found no ev­i­dence that the level of gov­ern­ment re­dis­tri­bu­tion found in Europe or North Amer­ica had any ad­verse im­pact on growth rates. The pa­per has be­come the touch­stone for what Jonathan Ostry, its lead au­thor, only half-jok­ingly calls the “kin­der, gen­tler IMF.”

Mean­while, Blan­chard had raised eye­brows when he sug­gested that the Fed­eral Re­serve and other cen­tral banks aim for in­fla­tion rates of 4 per­cent rather than the 2 per­cent tar­get now com­monly used. In­fla­tion and easy money are not the sorts of things one usu­ally as­so­ci­ates with a con­ser­va­tive fi­nan­cial in­sti­tu­tion ded­i­cated to en­sur­ing that lenders are re­paid and cur­ren­cies re­tain their value. But in an era of slow growth and fre­quent fi­nan­cial crises, Blan­chard ar­gued, higher in­fla­tion and in­ter­est rates in good times would give cen­tral banks more head­room to cut rates in bad times to sta­bi­lize economies.

“There’s noth­ing sci­en­tific about 2 per­cent,” Blan­chard said. “It comes from nowhere. It’s com­pletely made up.” While some aca­demic econ­o­mists are in­trigued, cen­tral bankers have not rushed to pick up on his very Key­ne­sian pro­posal.

In­tim­i­dat­ing but sweet

Justin Wolfers, a hot young economist, vividly re­calls the first course he took from Blan­chard at MIT: “The class was over sold. Ev­ery cor­ner of the room was packed. The lec­tures were flaw­lessly given. It was pro­foundly in­tim­i­dat­ing.”

“In­tim­i­dat­ing” is how many peo­ple de­scribe their first im­pres­sion of Blan­chard.

“He struck me as smarter than me,” said Ken Ro­goff, a fel­low grad­u­ate stu­dent at MIT. Ro­goff, another for­mer re­search di­rec­tor at the IMF, is a chess grand­mas­ter when not teach­ing at Har­vard.

The other de­scrip­tion you hear is “di­rect.” “Ex­tremely po­lite but ex­tremely di­rect,” a col­league says.

Sev­eral years ago, Wolfers — who would write his the­sis un­der Blan­chard — pub­lished a pa­per that, for him, was un­char­ac­ter­is­ti­cally the­o­ret­i­cal and com­pli­cated. As Wolfers said, “it was more about flex­ing in­tel­lec­tual mus­cles than say­ing some­thing true or im­por­tant about the world, which is the folly of young econ­o­mists. Shortly af­ter­ward, I got a note from Olivier: ‘I saw this pa­per. I don’t care for it.’ It was an in­cred­i­bly gen­er­ous thing, tak­ing the time to tell me I wasn’t be­ing true to­my­self.”

Many friends and col­leagues re­mark upon this hard-on-the-out­side, soft-on qual­ity. At the Fund, he lunched regularly with in­terns and ju­nior staff. On take-your-child-to-work day, he once used domi­noes to ex­plain fi­nan­cial crises to young would-be econ­o­mists. His farewell party in July drew more than 500 peo­ple.

Scott Si­mon, the NPR host, de­scribes Blan­chard as a dot­ing grand­fa­ther who’s al­ways up for a game of ping-pong with at the pool at the Water­gate com­plex where they both live. (“If he weren’t French, I’d say he put a lot of English on the ball,” Si­mon said.)

There are in Blan­chard’s out­ward re­serve, nat­u­ral el­e­gance and wry hu­mor strong hints of the French pro­fes­sional class from which he came. His fa­ther was a neu­rol­o­gist and pe­di­a­tri­cian, his mother a psy­chi­a­trist. His grand­fa­ther, Mau­rice Bokanowski, had been a min­is­ter in the French gov­ern­ment af­ter World War I, which in those days was un­usual for a Jew. He died in an air­plane crash in 1928.

By his own ac­count, Blan­chard was an in­dif­fer­ent stu­dent, “smart but un­in­ter­ested.” He did not have the grades to gain ad­mis­sion to one of the “grandes écoles” that still serve as gate­ways to the French eco­nomic and po­lit­i­cal elite.

Two things hap­pened while Blan­chard was at the Univer­sity of Paris-Nan­terre that would shape his pro­fes­sional life.

One was the 1968 ri­ots that shut down univer­si­ties and prompted bat­tles in the streets of Paris as po­lice stormed stu­dent bar­ri­cades. Blan­chard, who was in the thick of it, found it “in­cred­i­bly ex­cit­ing in­tel­lec­tu­ally.” But in time heal so found the in­ter­nal strug­gles among the Maoists, Trot­skyites and an­ar­chists tire­some.

Also at Nan­terre, he de­vel­oped a fas­ci­na­tion with eco­nom­ics. It came un­ex­pect­edly while he was laid up in bed with a long ill­ness, read­ing a book on the history of eco­nomic thought. But as he would dis­cover, the eco­nom­ics course at most French univer­si­ties was “abom­inable,” of­ten given over to “high math­e­mat­i­cal ab­strac­tion or Marx­ist rhetoric, with lit­tle con­nec­tion to re­al­ity.” To win his master’s de­gree in eco­nom­ics, he sub­mit­ted what he de­scribes as “a typ­i­cally French the­sis at the time, 200 pages of largely non­sense with math in it.” It was good enough, how­ever, to earn the high­est grade at Nan­terre that year and ad­mis­sion to the PhD pro­gram at MIT.

For a stu­dent, be­ing ad­mit­ted to the eco­nom­ics pro­gram at MIT in the late ’60s and ’70s was like a young base­ball player be­ing drafted by the New York Yan­kees of that era. The pater­fa­mil­ias was Robert Solow, the No­bel Prize win­ner, as­sisted by Stan Fis­cher (now vice chair­man of the Fed). To­day, their stu­dents con­sti­tute a who’s who of the world’s top aca­demic econ­o­mists and pol­i­cy­mak­ers: No­belists such as Ak­erlof, Joseph Stiglitz, Peter Diamond, Paul Krug­man and Jean Ti­role; for­mer Fed chair­man Ben Ber­nanke; and Mario Draghi, pres­i­dent of the Euro­pean Cen­tral Bank.

“Olivier was just less nerdy and un­cool than the rest of us,” Krug­man re­called.

Af­ter a short stint as an as­sis­tant pro­fes­sor at Har­vard, Blan­chard re­turned to MIT as a pro­fes­sor, where he taught for 25 years. He was depart­ment chair­man, co-edited the coun­try’s top-ranked eco­nom­ics jour­nal, pub­lished a widely used text­book and was rated among the depart­ment’s most pop­u­lar teach­ers. He also men­tored a gen­er­a­tion of star econ­o­mists. Blan­chard is ranked first in the world for the num­ber of ci­ta­tions his stu­dents have re­ceived for ar­ti­cles pub­lished in top eco­nom­ics jour­nals. (For his own ar­ti­cles, he is ranked No. 11.) “An economist’s economist,” said Richard Thaler, a be­hav­ioral economist at the Univer­sity of Chicago.

Within the pro­fes­sion, Blan­chard and his MIT col­leagues were at the cen­ter ofan ef­fort to in­cor­po­rate some new the­o­ries pi­o­neered by more-con­ser­va­tive, freemar­ket econ­o­mists — about the ra­tio­nal and for­ward-look­ing be­hav­ior of con­sumers and in­vestors— into the old Key­ne­sian frame­work in which mar­kets were im­per­fect and com­pet­i­tive and not al­ways self­cor­rect­ing. Their work laid the foun­da­tion for what would be called the “New Key­ne­sian” model now widely em­braced by cen­tral banks and pol­i­cy­mak­ers.

Ac­cord­ing to col­leagues and stu­dents, what dis­tin­guishes Blan­chard from other econ­o­mists is his abil­ity to sim­plify seem­ingly com­plex prob­lems. “Clar­ity of ex­pres­sion, clar­ity of mind,” is how Solow puts it. “There’s a neat­ness about his mind that stands out. Noth­ing ex­tra.”

In a pro­fes­sion in which rep­u­ta­tions are made by mas­ter­ing sub­jects that have be­come in­creas­ingly nar­row and tech­ni­cal, the va­ri­ety of top­ics Blan­chard has stud­ied is ex­tra­or­di­nary. In­deed, it is be­cause of that breadth that Blan­chard ac­knowl­edges he is un­likely to win a No­bel Prize. “I did not fun­da­men­tally change our view about any­thing,” he said, wist­fully but with no sign of re­gret. “I tried to pro­vide use­ful in­sights on many things rather than ob­sess­ing about one.”

A few days later, per­haps think­ing of that ex­change, Blan­chard sent an e-mail say­ing he had been reread­ing a book by his psy­chi­a­trist mother and came across a sen­tence she had writ­ten about her work that summed up his own ap­proach to eco­nom­ics: “I am not a guru or a ma­gi­cian. I think of my­self as an ar­ti­san.”

‘I think I’m to­tally French’

As he has ev­ery sum­mer since high school, Blan­chard re­turned this year to the is­land of Re­off the At­lantic coast of France. Once a work­ing-class en­clave, Re has be­come the Martha’s Vine­yard of France, with high-speed trains from Paris whisk­ing much of the 5th and 16th ar­rondisse­ments to their Au­gust va­ca­tions.

Long be­fore the sun is up, Blan­chard has been check­ing on the overnight gyra neigh­bors when loung­ing tions of the Chi­nese stock mar­ket and edit­ing the latest drafts of the IMF’s an­nual World Eco­nomic Out­look sent by his staff. By 10, he may be play­ing ten­nis with his old friend Lionel Jospin, a for­mer pro­fes­sor and prime min­is­ter of France. Af­ter­ward, he’ll change into his sig­na­ture khakis, blue shirt and boat shoes and head to LeV, a cafe over­look­ing the har­bor, for a cof­fee with his brother or a reg­u­lar gag­gle of civil ser­vants, lawyers, busi­ness­men and jour­nal­ists.

Nearby, at the open-air mar­ket, his wife, Noelle, gath­ers the mak­ings of a pic­nic lunch at one of the is­land’s many beaches. Late af­ter­noons, the lanky economist can in vari­ably be found play­ing a few rounds of pé­tanque, the French bowl­ing game, as the sun sets over the nearby dunes. There’s likely to be an in­for­mal din­ner around the large pine ta­ble with friends and visi­tors at his town­house, with its view of an old wind­mill in the dis­tance.

Blan­chard seems at times to be more Amer­i­can than French. Aside from sum­mers in Re, he has lived in the United States for more than 40 years. He’s raised three daugh­ters here — one works for the State Depart­ment and the oth­ers live in Brook­lyn. He prefers Amer­i­can football to Euro­pean soc­cer. (“It’s like play­ing chess but with a phys­i­cal as­pect. Each play is such a beau­ti­ful thing.”)

And given the in­tractably ide­o­log­i­cal na­ture of French eco­nom­ics and the rigid hi­er­ar­chy of the aca­demic pro­fes­sion there, he’s never given much thought to re­turn­ing home. Af­ter the IMF, he’ll re­main in Washington as a se­nior fel­low at the Peter­son In­sti­tute, the pre­em­i­nent think tank for in­ter­na­tional eco­nom­ics.

Yet there is still an un­mis­tak­able French ac­cent to Blan­chard’s speech, thought and man­ner. He will tell you why French univer­si­ties are medi­ocre and why the 35-hour work­week is a ter­ri­ble idea. He can list the ways French pol­i­tics and cul­ture have gone stale. Yet when an Amer­i­can of­fers such crit­i­cisms, he is quick to de­fend his na­tive coun­try. “I think I’m to­tally French,” he said, “only maybe a bit less cyn­i­cal.”

Beat­ing back the ‘aus­te­ri­ans’

The prime min­is­ter was not pleased. It was April 2013 and Blan­chard was in Lon­don, giv­ing a live in­ter­view on Sky News. Ear­lier that year, the IMF had low­ered its growth forecast for Bri­tain, cit­ing the neg­a­tive im­pact of deep bud­get cuts that were at the heart of the eco­nomic pro­gram of David Cameron’s gov­ern­ment. Now here was Blan­chard declar­ing that by con­tin­u­ing to pur­sue a pol­icy of fis­cal aus­ter­ity, Bri­tain was “play­ing with fire.”

It wasn’t long be­fore the phone was ring­ing back in Washington in the of­fice of Chris­tine La­garde, the IMF’s man­ag­ing di­rec­tor. Cameron was on the line.

“There were strong in­ter­ac­tions” is all that Blan­chard, with an imp­ish grin, will say about the en­su­ing con­ver­sa­tions.

Blan­chard’s foray into Bri­tish pol­i­tics was part of larger cam­paign to re­store Key­ne­sian poli­cies to their right­ful place at the Fund and dis­credit the no­tion, which had gained cur­rency over the pre­vi­ous decade, that re­duc­ing bud­get deficits can pull economies out of re­ces­sion.

Be­gin­ning in 2011, Blan­chard’s re­search depart­ment be­gan churn­ing out em­pir­i­cal stud­ies show­ing that, in most ad­vanced economies, at least, im­pos­ing fis­cal aus­ter­ity dur­ing re­ces­sions was a bad idea— that the boost in in­vestor and con­sumer con­fi­dence that aus­ter­ity was sup­posed to de­liver was not enough to off­set the eco­nomic drag from cut­ting spend­ing and rais­ing taxes. Preach­ing fis­cal rec­ti­tude was in the IMF’s in­sti­tu­tional DNA, but the new re­search made it pos­si­ble for Blan­chard and his al­lies to over­come it. “Olivier won the eco­nomic ar­gu­ment on bal­anc­ing aus­ter­ity and growth,” Lip­ton said. “The only ar­gu­ments left in­volve pol­i­tics and diplo­macy.”

Nowhere did the aus­ter­ity de­bate be­come more heated than in the five-year strug­gle to find a so­lu­tion to Greece’s fi­nan­cial and eco­nomic cri­sis. At its out­set in 2010, Euro­pean of­fi­cials in­sisted that any res­cue of a gov­ern­ment they viewed as prof­li­gate and in­ept re­quired deep bud­get cuts and higher tax rev­enue, de­spite warn­ings from Blan­chard and his col­leagues.

The IMF team was also un­suc­cess­ful in seek­ing a “restruc­tur­ing” of Greek debt, the po­lite term for forc­ing lenders to ac­cept a re­duc­tion in the amounts they would be re­paid. The rea­son: French and Ger­man banks held so many Greek bonds that any restruc­tur­ing might re­quire taxpayers to bail out the Euro­pean bank­ing sys­tem, a po­lit­i­cal non-starter with Euro­pean lead­ers. Jean-Claude Trichet, head of the Euro­pean Cen­tral Bank, also feared that forc­ing in­vestors to take a “hair­cut” on Greek bonds might trig­ger panic selling of the bonds of Italy, Spain and Por­tu­gal.

In the end, the IMF re­lented, agree­ing to par­tic­i­pate in a Greek res­cue that Blan­chard and many of its of­fi­cials be­lieved was doomed to fail. To ra­tio­nal­ize its par­tic­i­pa­tion, the Fund had to is­sue an eco­nomic forecast that the struc­tural re­forms re­quired of the Greek gov­ern­ment — dereg­u­la­tion of la­bor and prod­uct mar­kets, an over­haul of the pen­sion and tax col­lec­tion sys­tems, the sale of gov­ern­ment-owned mo­nop­o­lies — would pro­vide such an im­me­di­ate boost to the econ­omy that the spend­ing cuts and tax in­creases would re­sult only in a short, mild re­ces­sion. The Fund also had to break its rule against mak­ing loans to coun­tries so in­debted that the money was un­likely to be paid.

“I was sure the debt was not sus­tain­able,” Blan­chard said, “but we felt we had no other choice but to take the po­lit­i­cal con­straint as a given and go along with a pack­age we were rather skep­ti­cal about.”

The next year, how­ever, Strauss-Kahn re­sumed his be­hind-the-scenes cam­paign for a restruc­tur­ing of Greek debt. In May 2011, he headed to Europe to try to per­suade po­lit­i­cal lead­ers to take a new ap­proach to fi­nan­cial res­cues. He never made it. En­route, he was ar­rested in New York for al­legedly sex­u­ally as­sault­ing a ho­tel maid — a charge for which he would never be con­victed but which led to his res­ig­na­tion from the IMF.

His re­place­ment was La­garde, who in her pre­vi­ous role as French fi­nance min­is­ter had vig­or­ously op­posed any con­sid­er­a­tion of debt restruc­tur­ing. A non-economist, how­ever, she came to rely heav­ily on Blan­chard’s ad­vice and soon be­came a con­vert to the cause of Greek debt re­lief. The fol­low­ing year, a restruc­tur­ing was an­nounced that cut the value of out­stand­ing Greek bonds by more than half.

Un­for­tu­nately, it was too lit­tle, too late. The Greek econ­omy had shrunk by 20 per­cent, un­em­ploy­ment had hit 27 per­cent, and Greek politi­cians and vot­ers were in no mood to push ahead with the struc­tural re­forms they had promised. Greece was again on the verge of de­fault as a new left-wing gov­ern­ment de­manded not only re­lief from fis­cal aus­ter­ity but fur­ther debt re­lief as well. And once again, Euro­pean lead­ers of­fered another loan pack­age re­quir­ing con­tin­ued aus­ter­ity with­out any debt restruc­tur­ing.

Only this time, the IMF re­fused to go along. In June, Blan­chard used a blog post to de­clare that no res­cue would suc­ceed un­less Greece was granted ad­di­tional debt re­lief in the form of lower in­ter­est rates and a length y mora­to­rium on re­pay­ments. Six weeks later, La­garde con­firmed that the IMF would not make any more loans with­out sub­stan­tial ad­di­tional debt re­lief. New talks have be­gun, and the bet­ting is that some sort of restruc­tur­ing is in­evitable.

The tyranny of bad ideas

Hav­ing to rec­on­cile the sup­pos­edly sci­en­tific in­sights of eco­nom­ics with po­lit­i­cal and bu­reau­cratic re­al­i­ties proved even more chal­leng­ing than Blan­chard had an­tic­i­pated. What he found most sur­pris­ing, he said, was how quickly a con­sen­sus can de­velop around some ques­tion on the ba­sis of what de­ci­sion-mak­ers read in the press or hear over din­ner.

“There’s a big risk of peo­ple agree­ing on some­thing with­out think­ing about it or do­ing the hard anal­y­sis,” he­said. In the face of in­com­plete in­for­ma­tion and gen­uine un­cer­tainty, he said, it was dis­qui­et­ing “how easily bad ideas be­come en­trenched.”

“It’s a strange process,” he mused, but one he is likely to miss.

MARVIN JOSEPH/THE WASHINGTON POST

Olivier Blan­chard stepped down last week af­ter seven years as chief economist at the IMF. His next act: se­nior fel­low at the Peter­son In­sti­tute.

MARVIN JOSEPH/THE WASHINGTON POST

Olivier Blan­chard, right, with­Mau­rice Ob­st­feld, his suc­ces­sor as chief economist at the IMF. Ob­st­feld de­scribes Blan­chard, his for­mer MIT class­mate, this way: “El­e­gant, sim­ple, log­i­cal, in­tu­itive.”

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